Europe Needs Reforms to ‘Break Shackles of Low Growth’

Stronger growth, job creation are priorities for Europe

Collaborative reforms necessary to safeguard European social model

Stronger financial, more integrated labor markets needed

“Europe must break the shackles of low growth and stop settling for second best,” said Strauss-Kahn. “This is the only way to save the social model and fulfill the common European destiny.”

Speaking to the European Banking Congress in Frankfurt, Germany, on November 19, Strauss-Kahn said the only answer is for more cooperation and greater integration, and now is the time to fortify the economic foundations of the union.

Europe’s social model that includes generous safety nets and protection for the disadvantaged is under threat because of high costs and growing public debts.

A stronger role for the center

The IMF chief outlined a number of areas for collective action, ranging from the financial sector, to a single labor market initiative. Only a collaborative approach driven by the center can bring about the reforms needed to secure stability, create jobs and ensure long-term growth.

To achieve these wide-ranging reforms, individual European countries must be willing to cede more authority to European institutions.

“When the agenda is left with nations, things stall,” said Strauss-Kahn. He added that peer pressure has not served Europe very well, and it’s time to change course.

In the key budgetary area, Strauss-Kahn outlined two ways of moving toward strengthened central authority. One would be to shift the main responsibility for enforcement of fiscal discipline and key structural reforms away from the European Council, and toward an independent body, such as the European Commission—the union’s executive body. Another would be to increase the size of centrally-allocated budgetary resources.

Strauss-Kahn’s remarks come ahead of a new IMF staff study on growth in Europe to be...